US stocks surged Friday as an end-of-week rally gained momentum and sent the Dow up over 600 points.
A new batch of bank earnings and economic data Friday morning increased investors’ optimism about the state of the economy and lessened worries that the Federal Reserve could raise rates by a full percentage point at its meeting later this month.
The Dow unofficially closed the day up 658 points, or 2.2%. The S&P 500 (DVS) added 1.9% and the Nasdaq rose by 1.8%.
All the major averages closed the week in the red. The Dow dropped by 0.2%. The S&P and Nasdaq fell 0.9% and 1.6%, respectively.
Citigroup (C) beat estimates and reported that it benefited from rising interest rates. Shares jumped by nearly 15%. Wells Fargo (WFC) reported quarterly profit declines of 48% but its stock still gained 6%.
A red-hot inflation reading earlier this week sent markets reeling: The consumer price index, reported Wednesday, rose 9.1% year-over-year, the highest rate since 1981. But strong retail sales for June and preliminary consumer sentiment data released Friday helped buoy markets and ease tensions.
Consumer spending makes up about two-thirds of the US economy. Given Friday’s good reports, the US economy may have grown in the second quarter, avoiding two straight quarters of a shrinking economy – a scenario some economists call a technical recession – noted Jeffrey Roach, chief economist at LPL Financial.
The new numbers and bank earnings helped soothe fears of a full percentage point hike by the Fed. Only 31% of investors are pricing in a 100 basis point hike as of Friday, compared with over 80% earlier in the week, according to the CME Fedwatch Tool.